Hedge Funds Rapidly Unwind Yen Shorts After Historic US-Japan Intervention
Leveraged funds slashed net short yen positions by over 74,000 contracts in five weeks, the sharpest reduction since 2008, as Japan and the US coordinated a massive currency intervention.
According to CFTC data, leveraged funds reduced their net short yen positions by 74,440 contracts over the five weeks ending August 4, bringing the total to 63,600 contracts. This was one of the fastest unwinds since the 2008 Financial Crisis, after positions peaked at 138,000 net short contracts at the end of June—the highest since 2007.
The pullback followed a historic two-day intervention by Japanese authorities on July 30-31, who bought an estimated $85 billion worth of yen. This marked the largest such operation since 2011's post-tsunami intervention and the first coordinated action between Japan and the US in 15 years, triggered after the yen weakened to its lowest level since 1986.
The scale of the intervention is rapidly reshaping currency market dynamics, forcing a sharp retreat by bearish speculators and signaling strong official resolve to support the yen.
Source: The Kobeissi Letter